This invention relates to managing investment assets.
Individual investors holding assets such as income producing real estate must manage the assets efficiently or risk losing value relative to well-managed assets. Well-managed properties may offer limited opportunity for high levels of appreciation. Real estate asset values can be enhanced by physical improvements, refurbishment and efficient management, making them more attractive to rent payers. However, a well-managed and already refurbished property may offer less opportunity for value enhancement, limiting the asset value growth potential to the general overall rise in real estate values.
Older and retired investors often have cash needs that are different from those of younger investors and are more likely to need a way to convert portions of their holdings into cash. Partial liquidation of holdings is frequently not a viable option. Such investors face significant tax liabilities upon the gain realized from the sale of their properties. Continuing to hold properties that have been refurbished and which are well managed and renting at market rates limits their opportunity for greater investment growth.
Diversification of investments can reduce the risk to which an individual investor is subject. That diversification may be accomplished by pooling the investments of several investors.
Tax on the gain (excess of the selling price over the tax basis) that is otherwise payable upon the disposal of the asset can be postponed by tax-deferred exchanges such as provided under section 1031 of the Internal Revenue Code.
Finding appropriate properties for which an individual investor's asset may be exchanged can be difficult. An investor may find the available selection of properties in a local market to be limited. An investor may not have the resources to locate and effectively investigate properties in distant markets. Moreover, a tax-deferred exchange, while providing an opportunity for enhanced asset growth through refurbishment and improved property management, may not meet an investor's current cash requirements.